Why Rite Aid (RAD) Stock Is a 'Hold' at TheStreet

NEW YORK (TheStreet) -- TheStreet Ratings team reiterated its "hold" rating for Rite Aid (RAD) on Tuesday with a ratings score of C.

Shares of the drug store operator were gaining 3.9% to $5.31.

About 22.7 million shares of Rite Aid were traded as of 12:10 p.m., compared to an average trading volume of about 28.8 million shares a day.

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TheStreet Ratings team rates RITE AID CORP as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate RITE AID CORP (RAD) a HOLD. The primary factors that have impacted our rating are mixed some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and growth in earnings per share. However, as a counter to these strengths, we find that the company's profit margins have been poor overall."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • RAD's revenue growth has slightly outpaced the industry average of 3.2%. Since the same quarter one year prior, revenues slightly increased by 3.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • RITE AID CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, RITE AID CORP increased its bottom line by earning $0.22 versus $0.12 in the prior year. This year, the market expects an improvement in earnings ($0.35 versus $0.22).
  • Powered by its strong earnings growth of 333.33% and other important driving factors, this stock has surged by 45.82% over the past year, outperforming the rise in the S&P 500 Index during the same period. Looking ahead, however, we cannot assume that the stock's past performance is going to drive future results. Quite to the contrary, its sharp appreciation over the last year is one of the factors that should prompt investors to seek better opportunities elsewhere.
  • The gross profit margin for RITE AID CORP is currently lower than what is desirable, coming in at 30.60%. Regardless of RAD's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 1.96% trails the industry average.
  • You can view the full analysis from the report here: RAD Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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